Colorado's justices swat down liability for individual insurance claim handlers –

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Members of the Colorado Supreme Court question Michael T. McConnell, attorney for Centura Health, in the case of French v. Centura Health Corporation.
Colorado Supreme Court Justice Melissa Hart

Members of the Colorado Supreme Court question Michael T. McConnell, attorney for Centura Health, in the case of French v. Centura Health Corporation.
A person may only hold insurance companies liable for the denial or delay of payments on a claim, and not individual claims handlers, the Colorado Supreme Court ruled on Monday.
Multiple industry groups had written to the court arguing state law did not envision that claims adjusters could be held financially responsible for their decisions. The U.S. Chamber of Commerce called such lawsuits a “cynical ploy to terrorize individual employees,” and the Coalition Against Insurance Fraud warned that premiums would rise on insurance policies as a result.
Even some justices, during oral arguments in January, wondered who would take a job as a claims adjuster in Colorado with the potential for civil liability hanging over their heads.
Ultimately, the court interpreted a set of changes the General Assembly enacted in 2008 to prohibit the unreasonable delay or denial of payments on an insurance claim to apply only to companies, and not their employees.
“Because the insurer — not any individual employee — authorizes payment, this language indicates that an action for unreasonable delay or denial of insurance benefits is triggered by a decision of the insurer, not the adjuster,” wrote Justice Melissa Hart in the court’s opinion.
Colorado Supreme Court Justice Melissa Hart
The question of liability had come to the Supreme Court by way of Colorado’s federal trial court. Alexis Skillett sued Allstate for breach of contract and acting in bad faith after a motorist collided with a car she was riding in. She also accused the claims handler who denied her claim, Collin Draine, of violating the state law prohibiting unreasonable denial or delay of payment.
Allstate transferred the case to federal court, arguing that Skillett had only included Draine in the lawsuit so it could remain in state court, given that Skillett and Draine were both Colorado residents. Allstate is based in Delaware.
Although the state’s Court of Appeals decided in 2013 that third-party claims processors could not be sued under the 2008 revisions to Colorado law, a federal judge in a separate case concluded that the law was ambiguous about liability for the employees of insurance companies. He refused to dismiss that lawsuit against two claims handlers, one of whom was also Draine, given that the Colorado Supreme Court had not definitively weighed in on the matter.
Shortly afterward, in June 2021, U.S. Magistrate Judge Michael E. Hegarty agreed to certify the question — meaning to ask the Supreme Court directly how to interpret the law — in Skillett’s case and on behalf of the other federal lawsuits making similar claims.
“(I)t appears unlikely that the issue of individual adjuster liability under the Statutes will be reviewed by the Colorado Supreme Court through the state court system on direct appeal, and certainly not as quickly as certification would accomplish that goal,” Hegarty wrote.
In interpreting the law, the Supreme Court weaved through multiple parts to arrive at a coherent meaning. In addition to the provision allowing people to sue for the unreasonable delay or denial of payment, a related provision forbids a “person engaged in the business of insurance” from making unreasonable delays or denials. In yet another part of the law, a “person” meant an insurance adjuster.
Under Skillett’s reading, claims handlers, as persons engaged in the business of insurance, could be sued for denying payment on her claim. 
The defendants arrived at a different conclusion. The law also stated that “an insurer’s delay or denial was unreasonable” if the insurance company delayed or denied payment without a reason for doing so. Therefore, they argued, the liability fell on the corporation, not its employees.
The Supreme Court sided with the latter interpretation, believing the “context makes clear” that individual liability is off the table. Hart, writing for the court, explained that unreasonable delays or denials apply to “covered benefits,” and only an insurance company can provide coverage to someone.
“Insurers and insureds — not adjusters — are the parties to an insurance policy. They are the ones who undertake obligations under such policies, and it is the insurer — not the adjuster — who may be obligated to pay insurance benefits,” she wrote. 
The decision avoids what many outside groups characterized as an untenable predicament for employees of insurance companies. The Colorado Claims Association described the possibility of claims adjusters following company policy and denying a claim, only to be sued, or accepting a claim against their employer’s wishes to avoid personal financial liability.
Skillett had disputed that analysis, arguing that in the absence of employees being held accountable for their decisions, “adjusters are incentivized to underpay claims out of blind loyalty to their insurance company employers, who are so motivated to delay and deny payment of claims the Colorado General Assembly was forced to pass a statute prohibiting such conduct.”
The case is Skillett v. Allstate Fire and Casualty Insurance Company et al.
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